Fears regarding the corona virus hit global equity markets hard on Monday. Reports of the virus spreading rapidly in Italy, Korea, and the Middle East caused stocks to fall sharply. By the end of the day global indices were looking at their worst one-day losses in years.
As for the domestic indices, all four fell over 3.0%. The Nasdaq took the worst hit again and this time the loss was 3.71%. The Dow fell 3.56%, the S&P dropped 3.35%, and the Russell lost 3.01%.
All 10 of the main sectors dropped sharply as well.The utilities sector dropped 1.17% and that was the smallest loss of the bunch.
The consumer staples sector fell 2.3% and that was the second smallest loss.
The energy sector took the biggest hit of the sectors, falling 4.62%.
The tech sector dropped 4.13% as the second worst performer. Six of the sectors fell more than 3.0%.
My scans turned slightly more negative last night with 43 bearish signals and 13 bullish signals. That is the seventh straight trading day of negative results.
The barometer still rose when these results were added in to the equation. The final reading last night was -27.8 after a reading of -35.1 on Friday.
Today’s trade idea is another bearish one and this time the subject company is Allegheny Technologies (NYSE: ATI). The specialty metals producer appeared on the bearish list and its fundamental ratings are subpar. The EPS rating is a 39 and the SMR rating is a C.
The daily chart shows how the stock has been in overbought territory since the beginning of February, at least based on the stochastic indicators. The stock tried to break above its 50-day moving average, but dropped back below the trend line with yesterday’s big drop.
Buy to open the April 20-strike puts on ATI at $1.55 or better. These options expire on April 17. In order for these options to double the stock will need to reach $16.90. The stock dropped to $16.40 back at the beginning of the month, so it won’t have to reach a new low to hit our target. I suggest a target gain of 100% with a stop at $20.00.
— Rick Pendergraft
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